To all concerned parties: December 19, 2018 Investment Corporation Industrial & Infrastructure Fund Investment Corporation (Tokyo Stock Exchange Company Code: 3249) Representative: Yasuyuki Kuratsu, Executive Director URL: http://www.iif-reit.com/english/ Asset Management Company Mitsubishi Corp.-UBS Realty Inc. Representative: Inquiries: Katsuhisa Sakai, President & CEO Hidehiko Ueda, Head of Industrial Division TEL: +81-3-5293-7091 Notice Concerning Acquisition of Real Estate IIF Tsukuba Manufacturing Center (land with leasehold interest) Industrial & Infrastructure Fund Investment Corporation ( IIF ) announced today that Mitsubishi Corp. UBS Realty Inc., IIF s asset manager (the Asset Manager ), decided to acquire domestic real estate (the Acquisition ) as outlined below. 1. Summary of Acquisition Property number (Note 1) Property name Location Seller acquisition price Appraisal (Note 3) value Unrealized gain (Ratio) (Note 4) NOI yield (Note 5) NOI yield (after depreciation) (Note 5) acquisition date F-16 IIF Tsukuba Manufacturing Center (land with leasehold interest) Ryugasaki-shi, Ibaraki IDEC Corporation (Note 2) 900 1,320 +420 (+46.7%) 8.3% 8.3% (Note 1) Property number classifies properties owned by IIF into three categories, namely, L (logistics facilities), F (manufacturing, research and development facilities) and I (infrastructure facilities). (Note 2) When the property is acquired through a bridge structure, the name of an actual seller is indicated. The bridge seller is a business company in Japan. The bridge seller does not fall under the category of related parties of IIF / the Asset Manager. (Note 3) The appraisal value is based on the figure shown on the appraisal report as of December 1, 2018. (Note 4) Unrealized gain represents the difference between appraisal value and anticipated acquisition price of the property to be acquired. The figure stated above is the assumption and there is no assurance for the figure to be realized. The Unrealized gain ratio is calculated by dividing unrealized gain by the anticipated acquisition price. (Note 5) For NOI yield and NOI yield (after depreciation), please refer to Reference: Definitions of Individual Calculation Formulas at the end of this news release. January 11, 2019 2. Reason for Acquisition IIF decided to acquire the anticipated property based on its judgment that the characteristics of the property is aligned with IIF s investment strategies, specifically, the acquisition of quality assets that would contribute to increased cash distributions per unit. In deciding whether to acquire the property, we evaluated the property in terms of the following three key points; profitability, long-term usability and versatility. Please refer to section 3. Summary of Acquisition for the details. 1
Key Points Manufacturing facility (land with leasehold interest) located in prime area with high versatility to be acquired through CRE proposal using cash in hand. The anticipated acquisition with NOI yield of 8.3% and unrealized gain ratio of 46.7%, contributing to the growth of dividend per unit and the net asset value Acquisition Highlights Acquisition through a negotiation after IIF offered a CRE proposal to IDEC Corporation, a major control instrument manufacturer in business for more than 70 years and listed on the first section of the Tokyo Stock Exchange Capturing the needs of facility consolidation in IDEC Corporation, IIF proposed to purchase IDEC s noncore asset with sale and lease back condition Acquisition of the land with leasehold interest located in a prime location in Tsukuba-no-sato Industrial Park included in Tsukuba International Strategic Zone, which is located near residential areas with advantage in labor securement Long-term Usability (Likelihood of Long-term Use by Current Tenant) Medium-term usability secured with the non-cancellable period by April 2023, as specified in the lease contract with the current tenant Versatility (Versatility as a Real Estate Asset) <Location> Location within approx. 7.0km distance from Ami-Higashi IC on Ken-O Expressway, within Tsukuba-no Sato Industrial Park comprised in Tsukuba International Strategic Zone, allowing for 24-hour operation Location close to Ryugasaki New Town and other residential colonies, which means advantage in securing a workforce Enhanced potential as a logistics site, underpinned by the new opening of the section of Ken-O Expressway from Sakai-Koga IC to Tsukuba-Chuo IC in February 2017 3. Summary of Acquisition (1) Summary of Property Type of asset acquisition date (Note) acquisition price Appraisal value Appraiser Date of trust beneficiary rights set Trustee trust period end Location (address) Real estate January 11, 2019 900 million yen CBRE K.K. 1-9-1, Kouyodai, Ryugasaki-shi, Ibaraki Summary of building structure evaluation Evaluator Evaluation date Immediate Short-term Long-term Repair cost for the forthcoming 12 years (annualized average) 2
Land area Zoning FAR/building-to-land ratio 17,721.03 m2 Industrial-specialized area 200%/60% Building structure / stories Type of Possession Ownership Earthquake PML Completion Gross floor area Collateral conditions None Type of building Soil environment survey has been carried out by Land Solution Inc. since lead and fluorine has been used and arsenic has been detected in the past investigation. Class one specified Special notes hazardous substances have not been detected in the soil gas survey, and meet all standards of the class two specified hazardous substances in the soil survey. As a result, it is considered that the possibility of health hazards by specific toxic substances is small (Note) acquisition date is the delivery date with regards to the property expected as of today. (2) Description of Lease Relating to Acquisition Total leased Annual rent Number area (excluding Tenant(s) of (occupancy consumption tenant(s) rate) tax) IDEC Corporation 1 17,721.03 m 2 (100%) Not disclosed (Note) Revision of rent or termination during the lease period Period of contract 30 years (from April 19, 2018 until April 18, 2048) Deposit Not disclosed (Note) Contract type: Fixed-term leasehold for business purposes Renewal and Revision: Neither the lessor nor the lessee may revise rent during the lease period. However, when significant changes in economic conditions etc. occur, lessor and lessee shall consult regarding rent revision. The lessee may not terminate the lease agreement until April 18, 2023, and after April 19, 2021, excluding the case where the lessee terminates by giving prior notice to lessor in writing 2 years after the notification date, may not terminate the lease agreement. Regardless of above, lessee may terminate the lease agreement by paying penalty equal to the rent from the termination date till April 18, 2023 by notifying in writing by April 18, 2021 with a termination date 2 years after the notification date. When the lessee notifies the lessee in writing after April 19, 2021, regardless of above, by paying penalty equal to rent from the termination date till the subject date, lessee may terminate the lease agreement with the termination date 2 years after the notification date. Regardless of above, if the lessee introduces a new tenant candidate to the lessor, and if the lessor determines that it can enter into a satisfactory fixed-term leasehold for business purpose between the new tenant, lessee may terminate the lease agreement on the maturity date by notifying the lessor 1 year before the maturity date. Others: The tenant indemnifies the lessor with respect to damages etc. attributable to the tenant s use of the land under the terms of the land lease. If the tenant is required to remove any soil in the land due to soil contamination attributable to its use of the land, the tenant shall remove such soil at its own expense and responsibility at the lessor s request. The tenant shall also indemnify the lessor or third parties who have incurred damages losses, costs, etc. attributable to the use or storage of hazardous substances on the land and structures built on the land, or contamination from such hazardous substances. If the lease reaches its maturity and the contract is neither extended nor renewed, or is terminated, the tenant shall immediately vacate the structures on the land and return the land to the lessor as a vacant site. The definition of vacant site also includes the rectification of contamination to levels lower than standards set forth by the relevant laws or regulations or environmental standards. (Note) IIF has not obtained the necessary permission from the lessee to disclose this information 3
Located in the Tsukuba International Strategic Zone where many companies concentrated 4. Profile of Seller Although the seller is a business company in Japan, the seller s profile cannot be disclosed as we have not obtained consent from the seller with respect to disclosure. There is no capital, personal or business relationships to note between IIF / the Asset Manager and the seller. The seller does not fall under the category of related party of IIF / the Asset Manager. 5. Profile of Buyer, etc. With respect to the Acquisition, there is no acquisition from seller with whom IIF/the Asset Manager have conflicting interests. 6. Broker None 7. Means of Payment The Acquisition will be financed by cash reserves. IIF plans to conduct a lump-sum settlement upon delivery the property. 8. Date of Acquisition Property name IIF Tsukuba Manufacturing Center (land with leasehold interest) Effective date of acquisition agreement (scheduled) Payment date Date of delivery of property December 19, 2018 January 11, 2019 January 11, 2019 4
9. Future Outlook of IIF The impact of the Acquisition on IIF s operating status for the period ending January 2019 (August 1, 2018 January 31, 2019) is not material and the forecast of operating status for the same period after planned acquisition remains unchanged. 10. Summary of Appraisal Report Appraiser CBRE K.K. Appraisal value Appraisal value as of: December 1, 2018 Item Value Notes Indicated value by income approach DCF method Calculated only by DCF method as only acquires the land with leasehold interest. Discount rate 5.0% Does not adopt terminal capitalization rate as it is assumed to be vacant land after lease period Terminal capitalization - based on fixed-term leasehold for business rate purposes. Other matters that the appraisal firm considered upon conducting the appraisal None 11. Various indices after the Acquisition NOI Yield 8.3% NOI 74 million yen NOI Yield (after depreciation) 8.3% Depreciation - million yen Reference: Definitions of Individual Calculation Formulas regarding NOI yield, NOI yield (after depreciation), and NOI referred to in Note 5 on Page 1 and 11. Various indices after the Acquisition on Page 5. NOI yield NOI Yield of the properties acquired or to be acquired is calculated as follows. NOI Yield = NOI* Acquisition Price of the property to be acquired** *The figures used for the calculation of NOI is the first-year net revenue with the DCF method as described in the real estate appraisal report upon acquisition for each of the anticipated acquisitions. If special circumstances are expected in the first year, the second-year net revenue is used. ** acquisition price is set forth in the sales value of the property in the purchase agreement (excluding acquisition-related costs, fixed asset tax, urban planning tax and consumption tax.) This assumption is the same for other calculations below. NOI yield (after depreciation) NOI yield (after depreciation) of the acquisition is calculated as follows. NOI yield (after depreciation)=(noi - depreciation*) acquisition price *Depreciation is calculated based on the straight-line method according to durable years in the same way as IIF s About IIF: Industrial and Infrastructure Fund Investment Corporation ( IIF ) is the first J-REIT focused on acquiring and operating both industrial and infrastructure properties in Japan-properties that play a vital role in the Japanese economy, and for which IIF expects to see stable demand in the mid to long term. With respect to industrial properties, IIF intends to invest in a diverse portfolio of properties, including manufacturing and research and development facilities. Please refer to our website at http://www.iif-reit.com/english/ Contacts: For the further information relating to this press release as well as IIF and its Asset Manager, please feel free to contact Mr. Hidehiko Ueda (Telephone Number: 81-3-5293-7090), Head of Industrial Division at Mitsubishi Corp.-UBS Realty, Inc., asset manager for Industrial & Infrastructure Fund Investment Corporation. Investor Relations: Telephone Number: 81-3-5293-7091 E-mail: iif-3249.ir@mc-ubs.com This English language release is for informational purposes only, and the Japanese language release should be referred to as the original. 5